FINANCIAL INCLUSION HELPING ROLL BACK POVERTY, INEQUALITY

If you are reading this paper issues of financial inclusion do not directly affect you. Or so you think.

You probably suffer a short memory or are too young to remember the days when having a bank account was a status symbol. Or that getting a loan was for a select few who had titled land in Kampala they could serve up as collateral. Or at an even more basic level that access to financial services was restricted by geography – in the capital all banks were located on or near Kampala road. 

Or that banking services were only accessible between 9 am and 1 pm and good luck to you if you miss the Friday close of business. Not only did no bank open on weekends there were no ATMs.

Your challenges with the banks now is the high lending rates and their inability to support your start up business – commercial banks are not designed for that.

The proliferation of banks now means more and more people have bank accounts today – about five million accounts in the 24 commercial banks today.

"While banks have expanded their activities dramatically in the last two decades or so, by far the most prevalent traditional financial service available, they still struggle to reach the majority at the bottom of the pyramid....

This week is financial inclusion week and the theme is “Getting Inclusion right”.

The emergence of mobile money has with one blow answered the challenge of lowering the cost of and providing wider accessibility of financial services.

So much so that in a recent survey where respondents were asked about their usage of financial services in the previous three months, usage of mobile financial services was reported at 36 percent last year up ten percentage points from 2013. Banks on the other hand so active usage fall to seven 

percent of respondents in 2017 from 10 percent in 2013.

Improved technology is improving access to financial services – mobile money accounts have exploded to 22 million in the last ten years or so, and already credit, insurance and hire purchase services are being offered over the phone.

But there is still a long way to go. While we have improved financial inclusion from 22 percent in 2006 to the current 43 percent, the full benefits of this shift are not widely appreciated or enjoyed.

So what? Why should financial inclusion – accessibility to a variety of financial services, be so important to you and I.

On a macro level it does several things among which it aggregates more and more of those little monies lodged under our mattresses, in our socks and bras for use among more people. And relatedly it increases the speed with which money moves around in the economy generating more and more economic activity.

On a personal level it improves safety of our money, carrying all your savings around with you is an accident waiting to happen. It increases the ease with which we can do transactions – increasingly now we don’t need to walk around with cash to buy anything. We don’t know it but that convenience represent savings of time which can be gainfully employed on other endeavours.

But it also allows us to have access to leverage or debt, which in effect increases our capacity to do more with less. If you were to buy a plot of land which would cost you sh10m to try and save the money from your income would not only take time but there is no guarantee the plot would still be sh10m by the time you have saved up. Borrowing would hasten the process and therefore the speed of wealth accumulation.

So for the economy as a whole and our own individual improvements in standard of living, the importance of having as many people as possible with access to financial services cannot be over emphasised...

There has to be a discussion between the policy makers, regulators, market actors and intended beneficiaries on how to further this agenda in way that while it maximises on the benefits, guards against the possible risks of a large financial sector.

The major challenge for countries like Uganda and at the heart of the poverty question, is the inability to unlock the full value of our land, human and capital resources. In all these cases but for purposes of this argument, our financial resources are not aggregated in meaningful sums for them to be deployed to finance projects that create jobs that transform economies.

Financial inclusion therefore is a means to an end. For quality, sustainable   economic growth financial inclusion is imperative.

OF GUN BUTTING AND STOLEN ROAD RAILS

A few days ago a few individuals decided to help themselves to the road rails on the recently done Mukono-Katosi-Nyenga road.

In the dead of the night these people parked their by the road side and helped themselves to 42 pieces of the guard rails. They would have got away with were it not for some vigilant residents who hid in the nearby bushes to witness the deed, in the process taking down the number plate and identifying the perpetrators of the crime.

Sometime during the process they got in touch with the nearby OC station to alert her to what was happening. But as it turned out she gave them the run around, didn’t turn up and failed to catch the culprits in the act.

It took the intervention from the OC’s superior the following day to get to the bottom of the crime rounding up the culprits and arresting the OC and another policeman as an accomplice.

You might have missed this story because we were all still reeling from the brutal arrest of Yusuf Kawooya last Friday.

"Kawooya was pounced upon by gun wielding men in broad daylight on a Kampala street. It is assumed that in his attempt to defend himself he may have put up a fight. Most of us wouldn’t know because the footage we saw started with Kawooya writhing on the ground as the gun toting (its on the tip of my tongue to say thugs) men half dragged him on the tarmac road, while gun butting his sides, which seemed like an attempt to inflict damage on his kidneys...

Within minutes of the afternoon incident the footage had torn up social media and given much fodder to the critics of the government.

On Saturday the security agents, as it turned out, were hauled before a disciplinary committee to answer for their sins before being carted off to jail. We await the conclusion of that case.

The two incidents are related in more ways than one.

In both incidents there was active involvement of security agents. These law enforcers were actively involved in breaking the very law they were sworn to uphold.

In both incidents it is hard to argue that these security agents had not done this before.

In Mukono it was suggested that the road-rail thieves were warned off by the same police who the crime was reported too. If that had not happened they may have stolen more road rails. So the police officers’ roll in the caper was to look the other way and ensure no interference from themselves as the resident law enforcement agents.

In the Kawooya arrest, except for the clumsiness with which they went about it --  the waiting vehicles, the arms and the numbers marshalled to arrest poor Kawooya all suggest they had done this before.

And in both instances they would have got away with had they not been “caught”.

In the road rail theft we would have dismissed it as old granny tales had the residents tried to insist that the police were in cohorts with the thieves. Or maybe not. But we would have thought the story had gone too far, to suggest the police knew about the incident and pointedly ignored calls to come and arrest the situation.

Had we not seen the footage in the second incident, we might have thought it was just a routine arrest of a suspect. Attempts to provide the detail of the arrest would have been dismissed as being melodramatic.

For starters we have to commend those who brought the incidents to light. It is obvious that without them both incidents would have been swept under the rag and far out of sight of the public conscience.

But more importantly it should be a signal to the security agencies that it cannot be business as usual.
Incidents in our immediate past with – the killing of senior police officers , the terror attack on Kyadondo in 2011 and other incidents offer enough proof that there people out there with designs to cause terror or at least public disturbance. So there is a need for security agencies in their various permutations...

We neither downplay nor dismiss these threats.

But is it too much to ask that our security agents stay out of criminality?

And secondly that in the pursuit of their business that they adhere to the laid out procedures and stick to the law? Onlookers would have been hard pressed to see how arresting the rotund Kawooya necessitated the show of armed force that we saw displayed in the minute long operation.

OF THE SOURCE OF THE NILE BRIDGE & KANYE WEST

To much pomp and fanfair last week, the new bridge across the Nile was commissioned.

The bridge with its dual carriage way and increased speed limit, will at the bare minimum, shorten the time it takes to and from eastern Uganda. Of the more than $7b (27trillion) that makes up Uganda’s external trade, easily two-thirds of it rumbles up and down our eastern corridor. While there are other bottlenecks, the 20 kmh speed limit on a single carriageway, enforced across the Nalubale dam should not be underestimated, backing up traffic for miles at the worst of times.

What we need now is for the Kampala-Jinja expressway to be commissioned too, to get the full advantage of the new bridge.

It will also serve as a tourist attraction and may possibly and in lieu of a more distinctive man made structure, serve as the symbol of Jinja – the adventure capital of the region. Not on par with Kenyatta International Conference Center (KICC) in Nairobi or the pyramids of Giza or the Burj el Arab in Dubai, the Source of the Nile Bridge if well leveraged can help Uganda gain top of mind awareness for intending visitors...

Which brings mevaround to the visit of US rapper Kanye West and his wife, reality TV show star Kim Kardashian.

Nothing serves better than third party endorsements in trying to sell anything.

If you went out and told everyone how brilliant you were, they would put it down to bragging and dismiss you out of hand. But if someone else says you are brilliant, depending on how well regarded he is, your credentials will receive an added boost.

Hence the advantage of people like Kanye and Kim coming around to see for themselves. Between them they have more than 200 million followers on social media. And that is to wildly understate the eyeballs on them. If only two million of all these followers relayed the information to their followers and even just ten of each followers’ followers relayed the information and another ten of the followers’ followers …. You get the point.

"Priceless exposure you cannot even put a monetary value to. Because believe it or not, the first hurdle many of us African countries have to vault is to just create awareness. You will be shocked how many potential visitors to this country cannot point it out on a map...

Thankfully the celebrity couple left without incident and hopefully they have fond memories of their stay here. Coming from the concrete jungles they inhabit, it is safe to say they couldn’t fail to notice all the green and naturalness around them.

That being said as a country we need to be more deliberate about these things. While most of these celebrities would prefer that their trips are private events, there has to be a more strategic way to attract them to our shores.

This business of finding on the morning of their arrival that there are in town and people start scrambling to create engagements – which is what it looks like to onlookers, is really a waste of a good opportunity.

But even more importantly we need to really beef up our local tourism. We need to market our own country to Ugandans, who would not think much of traveling to Mombasa, Zanzibar or Dubai. And it is not about familiarity breeding contempt, as many of these gallivanters have never come close to the mountain gorillas of Bwindi or the climbing lions of Queen Elizabeth National Park or the white water rapids of the Nile. Believe it or not, it often times is that they don’t know about these things.

The advantage too of having a strong locally driven tourism industry is that in the event of such freak occurrences as the ongoing Ebola outbreak in neighbouring DRC, which often leads to cancellations by foreign tourists, local travellers can help the industry stay afloat.

These third party endorsements from foreign and local tourists cannot be underestimated. They will often make the difference between negatives perceptions dominating people’s conscience or not.

To illustrate. According to the Neighbourhood Scout website, which serves investors and property managers Miami, Florida has one of the most violent crime rates in the US. Crimes that include murder, rape, armed robbery and aggravated assault all of which are widely reported in the Miami media.
But for us looking in that is not the Miami we know. Our images of Miami are of white beaches, beautiful Latinos and an all-around fun time. Make no mistake, the predominantly positive image has not happened by mistake....

For example hundreds of millions of dollars annually in film projects are attracted to Miami --$150m in 2015 alone. The producers of these projects are incentivised to shoot in Miami and in the process often perpetuate the happy-go-lucky-white-beaches image of Miami we have come to associate with the city never mind that the sunny city’s crime rate may dwarf all of Uganda’s in a year.

Apart from a deliberate and persistent image shaping effort, may it not have something to do with the fact that of the 10 million visitors to the city 55 percent of them come from the US itself?

JENNIFER MUSISI; CAN WE GET THE JOB DONE?

On Monday it went out that Kampala Capital City Authority (KCCA) boss Jennifer Musisi had thrown in the towel.

The news was received with muted shock because it is safe to say, that we generally knew her days were numbered from the time when it was reported she had cost the NRM victory in Kampala in the last election. Never mind that we would be hard pressed to remember the last time the NRM won in the capital city.

So despite the visible improvements done on the city during her seven year tenure and the future plans lined up, there were few if any people publically begging Musisi to reconsider her position.

"At the bar, weddings and funerals, we nod our heads knowingly and mutter to ourselves how she was wise to leave as the forces lined up against her … Eh! Eh!

The conversation always ends in unfinished sentences.

It is very possible Musisi jumped before she was pushed for any number of reasons. She is not an angel.

But the feeling cannot be helped that competence cannot be tolerated wherever it raises it head in this country. And that when it does and refuses to succumb to compromise, more drastic measures come in to play.

There are people uncomfortable with systematic ways of doing things and would rather allow the chaos or at least ambivalence in government processes, because they benefit from it, because they cannot operate in an orderly environment. Probably the irritating guys who create 7 lanes in traffic.

"This is worrying because while on a material level it means we will never get things done in this country, on a perception level, an emotional level, it creates despondency, hopelessness, a feeling that the good things are for other people and not for us...

It also perpetuates the feeling that hard work – especially in government, is for the losers and that the way to get ahead is to dip your fingers in the till. And when you have access turn up with a spade not a tea spoon.

A senior official lamented recently that the younger generations are in too much of a hurry.

They see more established people driving European luxury vehicles and they want to have them by their second pay check. They have developed a taste for fine wines and spirits before drinking the baser alcohols, an important rite of passage in days gone by. They want to party abroad in the celebrity haunts they have seen on TV, before they have toured our country.

It probably explains why we think that for Musisi seven years at the top of the capital city is enough, never mind that she was working to reverse decades of rot.

It is clear that though we speak passable English, wear cheap suits and fly every so often to far off countries, we still come from a third world country, not only in our physical environment, but in the way we do things and in our mindsets.

The city’s comical mayor Erias Lukwago broke into song on the news, as if to accentuate this point.

But one can see the logic.

The islands of competence make the rest of us look bad and therefore we need to cut them down to size, so that we can all continue to wallow in mediocrity or worse. These islands of competence raise the expectations of all of us, in the public and private sectors.

Musisi never saw a camera she did not like and in the heat of the moment she did not suffer fools gladly, but one cannot help feeling that her major shortfall is that she thought she would be allowed to get the job done.

A sad commentary on us rather than on the good lady from Mukono.

WE ARE CORRUPT BECAUSE WE DON’T PAY TAXES

In recent weeks those who have been agitating against new taxes, have argued that the government does not deserve their money because it is corrupt to the bone and it will not be unlike throwing good money after bad.

Last week parliament amended the excise duty act which retained mobile money duty but reduced its rate 0.5 percent and maintained it only on withdrawals. They also retained the tax on social media services, which had attracted a disproportionate amount of noise, given the relatively few users compared to mobile money services.

When the two taxes were initiated, government projected that about sh400b would be collected. 

The downward revision in the mobile money rates will reduce that significantly.

In July after one month of implementation URA announced they had collected sh27b for both.

The opposers of the new taxes point to poor government service delivery, wasteful spending on questionable projects and the lavish lifestyles of poorly paid technocrats as evidence that their hard earned taxes are going to waste.

"First of all as was reported there are only about million out of 11 million workers paying income tax, hence our low revenue collections to GDP of about 14 percent. The sub-Saharan average is a lowly 18 percent...

In sub-Sahara Africa the highest revenue collector is Lesotho with 42 percent of GDP.

Clearly there are too many people not carrying their weight, yet they earn incomes.

And the opposers may have got it backwards. In order to see an improvement of services and a lowering of corruption we need more people to pay taxes not less.

First off, because we pay so little tax in relation to the total economic activity inside our borders government this year will spend sh800,000 per Ugandan, that's the national budget per Ugandan. Of this sh400,00 comes from our taxes and the rest from loans and grants.

The amount government commits to spending is pitifully small compared to the countries we dream of living in, like Finland where government spends the equivalent of sh40m per citizen or Norway sh107m or even South Africa where it splurges sh77m per person.

And when you break down our budget even further, government has earmarked only sh57,000 per person for health, of this only sh20,000 per Ugandan will actually be spent on health worker wages and medicines. 

Clearly we expect too much from our budget. And this is before we factor in corruption.

It is obvious government is working with too little money, trying to spread it all around and doing little effectively.

"Interestingly if you did a cursory comparison of countries’ revenue collections to GDP and
Transparency International’s corruption index, the argument can be made that the countries which pay the least taxes in relation to their GDP are also among the most corrupt in the world...

And the opposite seems to be true, the countries with the highest revenue levels are the least corrupt.

So on the downside of this possible correlation are the backwaters of the world like Chad, Nigeria, Democratic Republic of Congo and yours truly, Uganda, while on the other side of the pendulum you have Denmark, New Zealand, Finland, Sweden and Switzerland.

It makes sense. If you are a country that to deliver services has to rely on its people for revenue, rather than rely on donor monies or huge commodity exports, maximisation of collected revenues to ensure service delivery will be critical.

If you collect people’s taxes and don’t deliver your political longevity will be that much shorter. To collect more revenues you not only have to tax people adequately but you also have to make sure more and more people, ideally everybody is paying their dues.

But if you are a country like our own, where only one out of 11 million workers are paying taxes, the political noise that the payers may muster can easily be drowned out by the indifference of the non-payers.

Hence you have a situation where MPS, paid through the treasury, decampaign an initiative to broaden the tax base.

It is true, those few who pay taxes are up to their eyelashes in tax. What is needed is for more and more people to carry the burden.

"Taxes is a political time bomb wherever you go. No one wants to pay taxes even in Finland or Sweden. The difference is that in those countries they have the mechanism and political will to enforce tax laws, compliance is not voluntary...

This is not to say there is no corruption in those countries, but because everyone has an interest in getting more value for their money in taxes, this tempers public officials’ greed. Their officials are not necessarily more morally upright than our goons, it’s just that they know that wages of sin are as good as death.

WE WANT TO GO TO HEAVEN, BUT WE DON’T WANT TO DIE

Wouldn’t it be great if every time we fell sick wherever we are in the country, we could walk into a health facility not have to endure long tortuous queues and still get quality services at the end of the brief wait?

Wouldn’t it be great if when we gave birth to our kids we were assured of a first class education all the way to university – and beyond?

Wouldn’t it be great if in addition to expansive highways we had high speed rail networks and affordable air connections within the country and to foreign destinations?

There is a place like that on this earth.

My friend who visited Helsinki the capital of Finland a few years ago has the best anecdote of the safe country we would love to see. The family they were visiting with ordered a flat screen TV online. On the day they were not home their TV was delivered and since the delivery man did not have access to the home he left the TV on the porch, we call it a veranda. Hours later the family returned home to the pleasant surprise that their TV had been delivered, took it in and installed it.

My friend eight years later, has not yet recovered from the shock that that was possible.

"Of course it was not always like this. The high living standards in Finland and Scandinavia have come after generations of interaction between the ruling elite and the citizenry...

So for example while the average annual government expenditure per citizen is about €10,000 (sh40m) the revenue to GDP collections in Finland stood at about 44.1 percent.

The comparable figures for Uganda are sh800,000 and 14 percent.

It is not rocket science if we want the good life we have to pay for it.

Of course the common refrain is that this government is too corrupt and it is affecting service delivery. The anecdotal evidence flies right in your face and it is hard to refute, so I will be the last to vouch for the integrity of our government.

"But truth too is that government has very little to work with. In effect in every sector of the economy even roads and electricity the resources available to them are hardly enough to do anything effectively.
And to make it worse they are trying to do everything, spreading themselves very thin and doing nothing particularly well...

For instance this year’s health budget comes in at sh1.9trillion or about sh47,500 per person. This is even more pitiful when you consider that of this money the cash spent on health worker salaries and medicine is sh810b or sh20,250 per person per year.

Even allowing for the proverbial corruption government is working with too little money to get anything done.

It therefore beats my understanding how our Members of Parliament can oppose new taxes on mobile money and social media – an effort to rope more people into the tax base and yet complain that government is failing to deliver services and even worse are watering at the mouth to increase their salaries yet again.

The way I see it government has two options neither of which are easy.

Either using the existing resources they decide in five year periods to focus on particular sectors and totally disregard others. So for example they decide that for the next five years we are going to push power and roads, bump their budgets like two to three times and the rest of the departments make do with whatever crumbs are left over. After the period an assessment is made on progress and decision is taken either to continue or choose other sectors.

The obvious political fallout cannot be underestimated.

Or government goes all out, hammer and tongs to collect all the taxes due to it from everybody who is liable. As it is now there about a million people who pay taxes on their income against a total workforce of 11 million.

Understandably there will be gritting of teeth all over the country at this, with opportunistic politicians leveraging it to increase the government’s unpopularity, but somebody is going to have to do it sooner than later.

"Given the miserable numbers the government is spending on every citizen the time of reckoning has long past. To stem poverty and all its ills – population growth, insecurity and disease, the government budget has to grow exponentially. For that to happen we all have to pay taxes....

And as for fighting corruption, how can government guard against corruption when its law enforcement and accountability agencies are not funded?

If we want to go to heaven (live a first world lifestyle), we need to prepare for death (paying taxes).

UGANDA’S EVOLVING POLITICAL PICTURE

This week former Forum for Democratic Change (FDC) party president General Mugisha Muntu announced that he was decamping from the party he helped found because of a difference in opinion of how they should proceed.

Muntu, field commander before he headed the Uganda People’s Defence Forces (UPDF), believes like any good general, you need to build up the structures and capacity of the party if you to have any real chance of wrestling power from Museveni. This does not take away from the work of firing up the base with constant attacks on the ruling party and government.

The other tendency championed by Colonel Kizza Besigye, is to carry the party along by force of will and take on the government head on in the streets and in the media.

"It’s an interesting dichotomy and not unlike the differences by the various fighting forces trying to overthrow the Uganda government in the 1980s...

There was the National Resistance Army (NRA) and its determination to fight a protracted war against the company. Building its capacity unseen in the jungles of Luwero, carrying out opportunistic attacks against government installations for the materiel they would throw up than for the publicity value and avoiding at all cost direct confrontation with the then superior forces of the Uganda National Liberation Army (UNLA).

On the other hand were those like Uganda Freedom Movement (UFM) led by Andrew Kayiira, banking on a speedy victory following the 1980 election, thought they could score some quick hits that would demoralise government soldiers precipitating mutiny and even coup.

The results of either strategy is now history.

It’s the classic case of the tortoise and hare. The plodding, boring tortoise seems out of its depth against the hare with its speed, aerodynamic construction and affable character. In the race the flashy overconfident hare is eventually pipped to the finish by the steady, tenacity of the tortoise.

No need assigning real life players to this analogy. It is clear for all to see.

No sooner had we absorbed the Muntu defection than it is reported that he might be linking up with flavour of the month Robert Kyagulanyi and his People Power movement.

If true, it’s obvious that the marriage is not one made in heaven. Will the measured methods of Muntu seat well with the youthful exuberance of Kyagulanyi? Who will forgo their ambition for the other? Which side will have the upper hand the more structured organisation that Muntu brings with him or the raw, spontaneous, unbridled energy of People Power?

"It’s clear that Muntu has left one fight in the FDC he may very well find again in an association with Kyagulanyi...

But in the greater scheme of things the movement in the opposition is part of a larger dynamic being fuelled by a stuttering economy and rapidly changing demographic.

Earlier this month the United Nations Development Programme (UNDP) released its Human Development Index, which scores countries according to such measures as life expectancy, infant mortality, access health services, education and water – the citizens’ standard of living. Uganda with a score of 0.516 came in 162 out of 189 countries. Never mind that we have improved our score a whopping 66 percent since 1990 – 0.311 when the HDI was first measured.

However what is driving our politics is that even this low score is not evenly distributed. When you account for inequalities our HDI score plummets to 0.370. Meaning that the majority of people are not enjoying the general improvements in the living conditions that blanket statistics like GDP growth suggest.

This is translated into a clamouring for change in our politics by a growing constituency, even for change’s sake.

This last point fits in very well with the changing demographic in the country.

"We now have more than 80 percent of the population below the age of 35, meaning none of these know anything about the “bad, old days”  and they don’t even learn about them in their history classes.

They have grown up in a third wold economy but more exposed than any generation before them, to first world lifestyles. They know better and they are impatient that that becomes their reality. Yesterday...

They have identified the status quo – not just the government, but all authority figures and power structures, as the cause of the current malaise. And they will lurch onto anyone will give them hope that they can overturn it.

This sea change is inevitable and unescapable. Muntu and Kyagulanyi are trying to feed off it. It is already knocking incessantly on the NRM’s fortified walls.